AUD/USD: Buyers establishing a near-term base

Technical Analysis

Author: Justin Low | audusd

AUD/USD continues to trade above the 100-hour MA

A more positive mood in markets and a weaker dollar is helping to provide some stability in AUD/USD after the initial spike higher in Asian trading. The pair moved to test the 100-hour MA (red line) and after breaking it, has continued to stay above now as we move towards mid-day in European trading.

As price stays above the 100-hour MA, that means that the near-term bearish momentum has been broken as long as buyers continue to hold above it. And right now, we're seeing glimpses of a base starting to be formed there with additional support coming from the 23.6 retracement level @ 0.7262.

Notably, there are offers sitting around 0.7280 and resistance is seen not far away around 0.7300 (38.2 retracement level @ 0.7298 as well) and that will be followed by the confluence of resistance levels from the 50.0 retracement level @ 0.7328 and the 200-hour MA (blue line) @ 0.7333.

Those will be levels to eye for if we start to trade higher into US trading later.

As for sellers, it's all about trying to get back below the 100-hour MA @ 0.7261. Move below and the bearish momentum is regained and 0.7200 (barrier options noted at the figure level too) will be keenly eyed once again.

But look towards the macro theme in the market as for clues to what is driving the pair. Right now it is a positive mood as US equity futures and European equities are trading higher, while commodities are recovering from yesterday's losses too. And that is helping with the stronger aussie sentiment today.

And that is despite the fact that Australian bond yields continue to slump and the yields spread between US and Australia 10-year bonds have widened to the year's low at 32 bps in favour of Treasuries:

If the widening spread is any indicator, it is that the AUD/USD bounce today may just be temporary.

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